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                  <td width="747"><h2>eBOOKS AT THE CROSSROADS: WHICH WAY FORWARD? <br />
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                  <td width="700"><h4>Introduction</h4><br />
                    <br />
                    <h5>The eBook market’s explosive growth continues to outpace forecasts. Near-monthly announcements of new and improved eReader devices, new alliances and partnerships, and additional investment in enabling technologies from some of the largest information technology and retail players have effectively repositioned the eBook debate from one regarding permanence to that of future adoption rates. The enormous volume of free and digital rights management (DRM)-freed content flooding the market, the emergence of new platforms and the increasing adoption of EPUB as the standard file format further demonstrate the market’s expansion and promise. Publishers and consumers are excited about the growth of the market, but this growth has also highlighted the need to address critical underlying business issues. Decisions regarding optimal eBook creation processes, cost, pricing and future royalty structures may have long- lasting and profound consequences across the entire publishing business. The eBook market is young, unbalanced and volatile, but this is the time to act.<br />
                    <br />
                    Many early players have fared well with a handful of eBook channels that mirrored traditional print-based pricing and royalty models by default, but publishers realize this model is not durable. <strong>Publishers Weekly magazine reported that 72 percent of publishers surveyed on digitization’s impact said the development of new business models, multi-media products and effective marketing strategies is the biggest challenge facing publishers today.</strong> Decision-makers in the publishing industry have concluded they need to carefully navigate this potentially lucrative, yet also tumultuous, landscape.<br />
                    <br />
                    Publishers must establish a sustainable eBook operating model that provides the flexibility to maximize profits from the existing model, while positioning them for future developments that may require multiple strategies. They have arrived at a crossroads, with the majority of publishers considering three viable paths:</h5><br />
                    1) Partner directly with platforms/eBook manufacturers <br />
                    2) Build and maintain an internal eBook conversion and distribution facility<br />
                    2) Partner with an expert third-party provider to convert, maintain and distribute eBook content to platforms<br />
                    <br />
                    <h5>This white paper presents the benefits and drawbacks of each of the approaches listed above, while providing a high-level overview of the most influential current and future trends, to help publishers and information services companies understand the market and choose the path that is best for them.</h5><br />
                    <br />
                    <h4>eBooks: Current Trends and Highlights</h4><br />
                    <br />
                    <h4>Current Landscape</h4><br />
                    <br />
                    <h5>The Association of American Publishers (AAP) recently released eBook sales statistics for July 2009. Trade eBook sales totaled $16,200,000, a 213.5 percent increase over July 2008 ($5,200,000). Calendar year-to-date sales are up 173.9 percent. Forrester Research reported a 150 percent increase in the number of U.S. eReader owners in the past year. Approximately three million eReaders will be sold in the U.S. in 2009, Forrester forecasts, and that number is expected to grow to 13 million by 2013.<br />
                    <br />
                    It is important to note that while Forrester is forecasting explosive growth, they also estimate that eBooks currently account for only 1.5 percent of total readership. The proportionate percentage of fiction titles, for which current eReader functionality is optimized, is likely much higher.<br />
                    <br />
                    Amazon’s “first mover” status, and seamless Whispernet1 integration of its 330,000+ available books onto its groundbreaking Kindle device, has established it as the preeminent eBook player. Amazon does not release Kindle sales information, but Jeff Bezos, Amazon's CEO and founder, told The New York Times in October 2009 that in instances where Amazon offers both a Kindle and paper version of a book, 48 percent of total sales result from the digital version. In May 2009, this number was 35 percent. A recent Amazon earning report2 stated that the Kindle is Amazon’s top selling item across all product categories, and is the “most wished for” and “most gifted” item.<br />
                    <br />
                    The Kindle is today’s leading device (although it is unknown to what extent) and its name has become a synonym for “eReader.” Competition is becoming more fierce, however, and the 1984 incident3 has underscored Amazon’s perceived lack of flexibility. Some Kindle users fear they are essentially users of a charging library. <br />
                    <br />
                    <br />
                    <span style="font-size: 14px"></span>Sony is moving full speed ahead and has recently unveiled Edition devices that are EPUB- compatible. Some of these devices are attractively priced, wireless and feature-rich, and have already upped the ante. Sony has also formed what appears to be a long-term alliance with Google. One million free public domain titles will be directly available to Sony Readers, with millions more likely to follow the eventual Google Book Settlement. Expanding beyond its platform, Sony Daily Edition purchasers will have wireless access to local libraries’ eBooks, as well as other platforms’ EPUB-formatted eBooks (provided the appropriate DRM rules are in place). By targeting new monetization streams from all EPUB content, Sony may be positioning its Readers, and future versions, to access and integrate non-eBook content (perhaps including Sony’s proprietary gaming content).</h5> <br />
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